Arista Networks Q2 Earnings Call Highlights

Arista Networks NYSE: ANET reported fiscal second-quarter revenue of just over $3 billion, up 37.7% from a year earlier and above its prior guidance of $2.8 billion, as demand from AI and enterprise customers supported the company’s first $3 billion quarterly revenue milestone. Chief Executive Officer Jayshree Ullal said the company has raised its full-year 2026 revenue outlook for the third time this year, now expecting approximately $12.6 billion in revenue, representing 40% annual growth. The revised forecast is $2.1 billion above the company’s prior Analyst Day goal of $10.5 billion and $1.1 billion above its May projection of $11.5 billion. Chief Financial Officer Chantelle Breithaupt said second-quarter non-GAAP gross margin was 63.4%, compared with 65.6% a year earlier and 62.4% in the first quarter. The year-over-year decline reflected end-customer mix, while the sequential improvement benefited from tariff refunds and customer mix. Operating expenses totaled $411 million, or 13.5% of revenue, as Arista increased investments in liquid cooling, high-radix switching and AI-optimized software. Research and development spending was $278.1 million, or 9.2% of revenue. Operating income reached $1.5 billion, equal to 49.9% of revenue. Net income was $1.3 billion, or 42.9% of revenue, while diluted earnings per share increased 39.7% year over year to $1.02. Cash, cash equivalents and marketable securities ended the quarter at approximately $13.3 billion, up from $12.4 billion at the end of the first quarter. Operating cash flow was approximately $1.1 billion. Inventory rose to $2.5 billion from $2.4 billion sequentially, with inventory turns holding at 1.7. Deferred revenue increased to approximately $6.9 billion from $6.2 billion in the prior quarter, including a roughly $600 million sequential increase in product deferred revenue. Purchase commitments rose to $9.7 billion from $8.9 billion at the end of the first quarter, largely related to chips for new products and AI deployments. The company did not repurchase stock during the quarter. About $817.9 million remained available under the $1.5 billion repurchase program approved in May 2025. Ullal said Arista’s AI fabrics momentum with Etherlink switches has expanded to more than 100 cumulative customers, up from the four or five initial customers the company discussed in 2024. She said the com...